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Financial Intelligence Report - 11.8.2015 Bookmark

Jobs For Who?

On Friday we got the non farm payroll report. Estimates were for a gain of 183,000 jobs. But when the number hit we didn’t print 183K jobs, we printed 271,000 blowing away even the most bullish estimates. Inside the report it was all rainbows and unicorns. We saw the unemployment rate fall to 5%, and we see wages rose an astounding 2.5%.  A better report you simply couldn’t make up!!  In fact that’s true, because they made this one up, and it was the best they could do.
Our friends at the BLS were hard at work on this report as their “Birth/death” model added a stunning 165,000 jobs to the report.  For any of you who don’t know what the B/D model is, it goes something like this… for every “X” amount of people that get laid off or fired, “X” amount of them go out and open a new business. They hire people. So for October the BLS says that 165K jobs were created by the “death” of one business spawning the “birth” of another.  Of course there’s no proof of these jobs. There are no tax receipts or W2’s or work orders. They simply say “it is so”.

One might question how so many businesses were opened and hired so many folks in October considering that the rate of new business openings is nearing all-time lows. But hey, don’t pay attention to the details, right? Right.  So just keep that in mind when you ponder this jobs report.

Next up we look at the composition demographics of the people who got these jobs. Well there’s a huge problem staring us in the face. Virtually ALL of the jobs went to folks 55 and older. Think greeter at WalMart or the nice elderly lady at the Publix Deli counter. In fact; for those in the prime working and income age group…those between 25 and 54, they actually LOST 119,000 jobs.  Do you wonder why so many so called Millenials are sleeping in mom’s basement? Well now you know. They can’t get a job because Grandpa took it.

Playing funny games with the jobs report and making up phantom jobs is nothing new. What is new however is how hard they pushed this particular report, a report that coincides quite nicely with validating Yellen’s push for a December rate hike.  What I mean by that is that just last month the jobs number came in at 147K and they had to REVISE IT LOWER to 137K. Then like magic the very next month jobs soared?  But wait, there’s something else somewhat slimy here. Not only did we discover a ton of newly employed, evidently they also got the biggest wage growth in years!  According to the report, wage growth was + 2.5%!  Go figure!

I think it reasonable to suggest that they pimped up this jobs report to give Yellen the exact ammunition she’d need to do “lift off” in December.  The bigger question is, does it matter?  

I’m on record saying that the Fed’s would hike rates this year. I expected it in September and they whiffed. So it looked like my prediction was circling the toilet. Now out of the clear blue the pencil pushers give her the exact medicine she said she needs to see for a Dec. hike. So, maybe my prediction had merit after all? We’ll see. But I think there’s a much deeper issue to discuss folks and goes to my recent meme about “big picture” topics.  The Fed’s are NOT stupid, they’re simply EVIL.  They  know the economy is in recession. They know the data of the last several months has been poor and “getting poorer”. Yet for all intents, they look quite determined to pull one off in December. What’s the agenda?  

A quarter of one point hike in rates is not a giant issue. But unlike many who think it will have no impact, I know that it will. We have built an economy for the past 5 years on ZERO rates. We have built a GLOBAL economy on the idea of rates falling for the past NINE years. All the intricate derivatives and risk parameters have been based on zero. Loans to Emerging markets will need adjustments. So while 25 basis points doesn’t seem like much, there are adjustments that will need to be made. It will have an effect.

But I think there’s something a bit more sinister here and it is why I said they’d hike rates this year in the first place. Their policy has failed the economy. We know that and YOU know that and THEY know that. After 9 years of falling rates we’re in a zombie economy kept together with bailing wire and gum. After seeing how dismally their policy has worked and how all it did was make the 1% “Ungodly” rich, while main street withers on the vine, they’re going to look awful inept, as the economy continues to erode.

If after all their QE programs, stimulus programs, and zero rate programs do nothing but keep us barely economically alive, how totally impotent will they look as the economy continues to slow? Very I’d say. And then they’d have to admit defeat. Well trust me on this one folks the Fed’s will NEVER ever ever say they failed. Job one at the Fed is to keep the Fed in power for all eternity and they cannot ever take the blame for failure.

That tells me that if they hike in December, they know something wicked this way comes. Think like a criminal for a minute. When the cops ask you if you did it, you say what? You say no. When you go to court you plead not guilty.  Well what do you do if you’re a criminal banker and you know that despite your huffing and puffing and esoteric academic certificates on your wall, your policy has failed? You lie. You say it is succeeding. You say it is succeeding so well, we “have” to hike rates so we don’t get behind the curve. Then you actually do it to “prove” to everyone how great things must be. They have to be great right; I mean no one would hike rates if things weren’t swell!

See the plot?  But here’s the twist. When I said in January that the Fed’s would hike this year it was NOT because the economy was going to get hot and they’d need to reign it in…heck no. I said they’d do it to further their agenda illusion that their policy was working. Then when some “event” happens, such as war, a bank failure, or what have you, they can point to THAT EVENT as the reason the economy slipped back. It wasn’t their policy that failed, no, oh no…it was China or war, or a dirty nuke, or locusts or Ebola, or what have you. It can never be them. Ever.

Friday’s jobs report was a sham. The Fed’s policy is a sham. They know the world is going down the tubes economically, and want to act like it isn’t. But that’s what criminals do folks. They lie.  Would you like some proof to how unscrupulous the Fed’s are? Take a look….

Many don’t know that when Alan Greenspan was the Fed head, he hated gold. He said it had no place in a modern economy. But do you know what he wrote about gold during his formative college years?  This was his 1966 letter….

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

So he loved gold and a gold standard as an academic. Then he  became the Fed head and hated it with a passion, saying it was a relic, an antique, something with no use in today’s economy. But now, now that he’s not the Fed head what’s he got to say?  Take a peek…

Speaking to the Counsel on Foreign Relations last year, this is how Greenspan responded to the question of Gold

TETT: Do you think that gold is currently a good investment?

GREENSPAN: Yes... Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.

So for 18 years he lied to you all about gold’s role as money. Do you really think Yellen or Fisher or any of these other lunatics are telling you the truth??  They are NOT. Yellen is not hiking rates because of a strong economy.  If she goes in December it is merely to put on the act that they did their job correctly and saved us.  Which leads me to believe she knows something’s coming that she can blame our ills on.

May you live in interesting times.

The Market…

If you look at the blistering run up we had through October, one of the more glaring facts is that just 4 major big cap stocks accounted for 20% of the entire move. In basic terms the rally is “narrow” meaning that few stocks are responsible for most of the move.  

In general terms, rallies that are narrow of breadth, usually peter out. But we’re in one of those very strange times that seem to only come about every decade or so, where nothing matters but the lust for higher asset prices. Think 98 – 2000, think 2006 – 2007.  
Momentum and “trend” are very powerful. When they’re building up a head of steam, very little can derail them. Economic reports just get tossed aside as “meh, who cares”.  Poor earnings get dismissed as “maybe next time”.  We’re in “momo” mode as we speak. Even Friday’s big jobs report which allows the Fed’s ample room to do a stupid rate hike didn’t kill things. They held up firm in the face of it.

So that means we just keep melting up, right? Is Santa still flying around the world tossing free money packages to all the good little financial wizards, creating the so called “Santa Claus rally?”   They are certainly going to try. On Friday as the market was starting to really slip, “someone” placed 4 monster S&P futures buys, exactly 10 seconds apart…which saved the index from rolling over.  I assure you that wasn’t mom and pop with their 10K dollar E-trade account.

Forget the lousy economic news. Forget the made up jobs number. Lets look at things from a technical measure. The S&P full stochastics (measured by K 14,3 D 3) have crossed and are pointing lower. The RSI stochastics are curving over, and close to crossing. The MACD ( moving average convergence/divergence) is at 2.9 heading towards the zero line.  Breadth is horrible.

If I just  landed here from a different planet and looked at that chart, I’d suggest the market is topping and about to roll over. But I’m not from another planet and I know who the Fed’s and Wall Street are. Fraud trumps technicals in the short run. So while the picture I see suggests a lower market coming, it really boils down to just this…will they let it go? Will the powers that be allow a red market, or are they so lust crazed that they keep the pedal to the metal, and melt us up into December?

I think we could see the big averages like the DOW and the S&P take a breather here, but it might not be a true sell off. Look at the small caps. The IWM had a nice day Friday. I could see them moving out of some of the big cap names and keeping the rally intact by pushing the smallies.

I’d watch for a bit of big cap weakness early in the week, and a push for the small caps. With the fear of a hike in Dec. the dollar went ballistic. So it makes sense that they turn their attention to the more domestic small caps that don’t have international exposure. That’s my bet for the week.

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